Report: The State of Household Wealth & The Racial Wealth Gap
Researchers have looked deeply into the 2020 Census and offer the most comprehensive representations of the wealth status of U.S. households. One key takeaway: Black households are at the very bottom.
a Prosperity Now research feature
The State of Household Wealth and the Racial Wealth Gap in 2020 report is based on the most recent data from the Survey of Income and Program Participation (SIPP), which provides a comprehensive representation of the wealth status of U.S. households. The report, put together by the Prosperity Now Applied Research Department, uncovers three significant facets of wealth in 2020 …
The stark unevenness in wealth distribution by geography, race/ethnicity, and age;
The widening ethnic and racial wealth gap; and
The ethno-racial disparities in homeownership, a key wealth contributor.
This brief uses median household net worth (household assets minus liabilities) as the measure of wealth. Unlike income, net worth includes assets and debts, which greatly impact households’ economic mobility.
This brief covers three important aspects of wealth in 2020:
Wealth is not evenly distributed. We discuss the current uneven distribution of wealth by geography, race/ethnicity, and age.
The wealth gap between Black-White and Hispanic/Latinx-White households is growing. We show how racial/ethnic wealth inequality has changed over the past five years.
Black and Hispanic/Latinx households lag on a key wealth contributor. We highlight racial/ethnic disparities in homeownership as one major asset that contributes to the disparate wealth building journeys for different racial and ethnic populations.
Wealth Is Not Evenly Distributed …
... by Geography
Nationwide, median household net worth was around $139,000 in 2020, but it varied widely by state. The wealthiest states (Hawaii, Massachusetts, Oregon, New Jersey, Minnesota, DC, Idaho, California, Maryland, and Wyoming) saw median net worth reach over $230,300, while the median value in other states settled below $88,000. For detailed information on net worth in each state, see the 2023 Scorecard.
… by Race & Ethnicity
Net worth also shows large disparities between racial/ethnic groups. In 2020, the median White household had $215,000 in wealth holdings compared to just $19,000 for the median Black household and $39,000 for the median Hispanic/Latinx household. Put differently, White households held 11 times more wealth than
Black households and almost six times more wealth than Hispanic/Latinx households. While White households have historically benefited from wealth building opportunities, the median Asian household net worth in 2020 was slightly higher at $274,000.
… by Age
Typically, households tend to amass wealth during the working years of the head of the household as a means of preparing for retirement, which follows a typical life-cycle pattern. Therefore, we see much higher levels of net worth for older age groups overall. However, even within those age patterns, there are disparities by race and ethnicity.
In 2020, young households were already positioned to have different wealth building journeys based on their race and ethnicity. Asian and White households under age 35 had median net worths of around $37,000 and $28,000, respectively. Hispanic/Latinx households under 35 had a median net worth of $16,000, while
Black households under 35 had a median net worth of around $4,000. While the average young adult, belonging to any racial group, generally has limited wealth, the wealth gap between racial and ethnic groups increases significantly with age. Troublingly, the gap was largest for older households who tend to be more
reliant on wealth for retirement and to pass it on to younger generations. While racial/ethnic wealth gaps for younger households (under age 35) fell around $30,000 or less, the difference in median net worth for retirement-aged Black and Hispanic/Latinx households reached over $300,000 compared to White
households and over $400,000 compared to Asian households.
The Wealth Gap Between Black-White and Hispanic/Latinx-White Households Is Growing
As indicated in the 2023 Scorecard State Summaries, while net worth across all households increased in the past five years, there has been no significant narrowing of the wealth gap between White households and households of color nationwide. And particularly for Black and Hispanic/Latinx households, an already substantial wealth gap compared to White households has grown even more. Overall, net worth grew by over $50,000 from 2015 to 2020. While median net worth for White households grew by almost $80,000 and for Asian households grew by over $100,000, Black net worth only grew by $6,000 and Hispanic/Latinx net worth by $19,000.
Due to lower net worth growth for Black and Hispanic/Latinx households, the existing wealth gap grew even bigger. For both groups, the gap compared to median White household net worth has steadily widened since 2015. The Black-White wealth gap grew from $124,000 in 2015 to $154,000 in 2018 to $196,000 in 2020. A
similar trend exists between White and Hispanic/Latinx households, where the gap grew from $117,000 in 2015 to $133,000 in 2018 to $176,000 in 2020.
Black and Hispanic/Latinx Households Lag on a Key Wealth Contributor: Homeownership
As one of the largest contributors to net worth, homeownership provides the opportunity to build financial stability, own an asset with the potential to appreciate, and transfer wealth to younger generations. However, unequal access to homeownership creates a structural barrier that prevents certain groups from building wealth.
Broken down by race and ethnicity, the 2020 data showed particularly large gaps in homeownership between White households and Black and Hispanic/Latinx households. On average, more than two thirds of White households owned the home they lived in. In contrast, less than half of Hispanic/Latinx households
and just over a third of Black households owned their home. In other words, there was a gap of over 20 percentage points between White and Hispanic/Latinx homeownership rates, and a gap of over 30 percentage points between White and Black homeownership rates. The White-Asian homeownership rate gap was more modest at just under 10 percentage points.
Homeownership is strongly associated with household wealth across race and ethnicity, but particularly so for Black households. Across race and ethnicity, homeowners in 2020 had significantly more wealth than renters. For Asian, White, and Hispanic/Latinx households, the additional net worth of homeowners compared to renters ranged from 23 times to 56 times more. For Black households, homeowners’ median net worth was 109 times greater than renters’ net worth, making homeownership all the more crucial for Black households.